Reconstruction Capital II planning to issue loan notes

RC2 : Reconstruction Capital II planning to issue loan notes

Reconstruction Capital II says it will hold a meeting on 29 October 2014 at which it will ask shareholders to approve the continuation of the company for two years until the AGM in 2016 and the issue of £8.45m of convertible loan notes.

They say the loan note issue will meet substantially all of the Company’s liabilities and will provide additional working capital for the following twelve months.

The loan notes could be significantly dilutive for shareholders – if converted the company would issue 162.6m new shares – equivalent to 38.5% of the company. Holders of the loan notes get interest at the rate of 10% per annum. The loan notes are secured against “first ranking securities granted by the Company over the shareholdings in and intercompany indebtedness owed to the Company by its direct subsidiaries, RC2 (Cyprus) Limited and Glasro Holdings Limited (being SPVs which hold the majority of the Company’s investments).”

Reconstruction Capital II was supposed to sell off its assets over the two years following its AGM in 2012. In the event not much was sold – the company blames this on the economic environment. It started to run out of cash and, when a shareholder loan fell due for repayment in April this year, the money was supplied by a bridge loan from Ion Florescu, the company’s manager. The loan notes would repay him but it looks as though he might end up owning most of them at the moment as, although €2.2m of the loan notes will be owned by “certain existing shareholders”, Ion is underwriting the balance. He already owns 28.3% of the shares and could end up as owner of 46%.

UPDATE 29/10 – shareholders approved  the proposals decisively

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